‘Brexit’ Expected to Rattle U.S. Economy, Shake Its Influence
The EU, Germany really, needs Britain more than Britain needs the EU.
More after the fold.
"Top finance officials say the damage from the so-called Brexit alone isn’t likely to be enough to nudge the U.S. into a contraction. But as skittish investors pull out of U.K. and European markets and pour into the safety of U.S. assets, a falling pound and euro could cause the dollar to surge, further suppressing demand for American exports."
The wealth of a nation is not dependent upon its exports but its imports. This even is likely to allow us the ability to buy more for even less with the dollar strengthening, and the EU weakening.
The EU is a declining, withering continental trade block, the only such in the world today. Every other continent is growing, but not Europe. Without Germany, the EU is not much more than a bunch of decrepit old men tin cups in hand seeking alms. There are a number of relatively prosperous small Northern/Germanic countries which are in relatively good shape, but the entire Southern swing of nations, including France, Belgium, and much of the Eastern European block are in abysmal condition. Greece is a dead man walking, it is only a matter of time. Spain is about to vote in a Socialist government which will likely take a country navigating shallow and difficult waters, and run it aground. Italy is a crafty negotiator who has no intention of performing as Germany demands, but regardless, the economy is unlikely to ever prosper within the framework of the EU.
Germany is the engine of the EU, and it needs to trade with Britain, and so it will, the other EU nations cannot lose their golden goose.
The US will receive a significant increase in foreign investment, the idea that this is bad, is silly.
"'The U.K. vote to exit the European Union could have significant economic repercussions,” Janet Yellen, chairwoman of the U.S. Federal Reserve, told Congress this week. A Brexit would “usher in a period of uncertainty” and fuel volatility in world markets. “That would negatively affect financial conditions and the U.S. economy.”
U.S. Treasury Secretary Jacob Lew said ahead of the vote, “I only see negative economic outcomes” were voters to decide to leave the EU."
If by negative outcomes he means people in foreign nations will increasingly turn to the US with investments, then I agree. I would not call that negative, however. Where else are people deeply uncertain going to invest? Saudi Arabia? Russia? China? India? France? Spain? Italy? Brazil? Oh come on! These statements were just to motivate the Britons with fear back onto the EU plantation. But it didn't work. Now they will have to explain why their "educated opinions" will fail to pan out.
Investment will flow primarily to the US, with much lesser amounts flowing to Germany, Japan, and Britain.
"At the same time, Washington frets Brexit will cause strategic and diplomatic rifts between the U.S. and many of its closest global allies.
“If they are no longer part of the European Union that means they don’t have a seat at the table when the European Union makes difficult decisions,” said Wendy Sherman, the lead negotiator in the Iranian nuclear talks and a former top State Department official.
Brexit could also distract the continent at a critical time, undermining U.S. strategic interests. The referendum could cause “a period of inward-looking by the European Union,” said Ms. Sherman. “That means they are less able to deal with Ukraine, less able to deal with the pressures from Russia, and less able to deal with transnational issues like migration, refugees and counterterrorism.”
Does this woman actually believe that Europe will do anything substantive about Ukraine or Russia? And if they cannot handle Brexit, economic migrants, the small number of actual refugees, and counterterrorism, cut them loose. The US deals with more immigrants, real refugees, counterterrorism, and the rest of the worlds problems each and every year. We can't just hit the fainting couch because we have the vapors over some minor problem. Suck it up Europe.
"Christine Lagarde, managing director of the International Monetary Fund, said the exact size of the impact on the U.S. economy is unclear, given all the uncertainties about how the vote will weigh on the U.K. and Europe’s economy and financial system. But “significant volatility and uncertainty prolonged over time” would likely fuel turmoil in U.S. financial markets.
A vote to leave is expected to sour investor and consumer confidence, incite market uncertainty and spoil spending appetites in Europe, maiming the region’s already anemic growth. European officials have scheduled emergency meetings to help calm financial markets and prevent contagion into weaker economies. Many economists say the U.K. could be pushed into a recession."
I expect US financial markets to recover nicely and quickly. Europe, on the other hand, this sounds correct. A relatively healthy Britain is Brexiting the EU, leaving Germany all but alone to carry the stone up the hill. France cannot help, nor can Spain, Italy, Portugal, Greece, Belgium, and much of Eastern Europe. The declining continent will be looking even more to Germany. Who knows what will happen in Britain, but whatever it is, it will be short term. The choice here was short term economic pain, or a large and increasing loss of sovereignty. A little economic pain today is worth the price in that case.
A last point about the "big name" economic types rattled off in the article. These are the same people who have had no idea what is going on for the past dozen years (more actually but those are fish to fry at another time). The 2007 financial crisis was a complete shock, the recovery was to be much more robust. Unemployment was to decline quickly and return to normal in just a few years. These people have predicted nothing correctly, yet they expect us to listen to the hot air pouring from their pie holes, and accept it as gospel. Sorry, not interested, in the advice of the terminally wrong. Their economic concepts and models of the world are incorrect, leaving them with nothing to offer but blather. Last December Yellen bumped rates when many of us were pointing out the incredible economic weakness in the world, and in America as well. But Yellen could see nothing. She has spent the first half of this year stammering on about nothing, attempting to sweep the December mistake under the rug.
These are not credible advisors.
"Collectively, the EU is almost the same size as the U.S. economy, one still struggling with high unemployment, weak investment and feeble growth.
Another EU slowdown would sap demand for U.S. exports as consumer confidence withers and the dollar strengthens."
When you put it that way, I can't imagine why Britain didn't want to stay in the EU. Nothing like a massive high unemployment, weak investment, feeble growth project to while away the time on! Especially one which you are financially bound to!
Time for the US to discuss extending NAFTA to Britain, and seek to include Britain in other free trade agreements. Maybe it is time for Britain to put the band back together, the commonwealth band, this time a trading commonwealth, not a political. The Anglosphere remains the most powerful disintegrated social, economic, and cultural block in the world, getting this band back together, especially if we can all agree to cut regulations and red tape just might kickstart the world economy. An economy which needs a good swift kickstart.